By: Dividend Sensei
The Best 3 Stocks To Profit In the Coming Years And Beyond
Interdigital (IDCC): 14% undervalued, 1.7% yield, 25% potential annual 10 year dividend growth, 26.7% 10 year annualized total return potential
The second fastest growing company on my master watchlist, InterDigital is a telecom radio manufacturers telecom equipment. The company is an innovation dynamo with over 19,000 patents (and counting). Analysts expect that the switch to 5G (starting in 2018 but picking up steam in 2020 and beyond) will cause its earnings and dividends to grow at 25% annually over the next decade. And given that IDCC’s dividend has risen by 27% annually over the last five years (and 30% last year) I consider those growth estimates reasonable. Best of all? The stock is currently 14% undervalued which means it’s a coiled spring that’s ready to pop.
Enbridge Inc (ENB): 80% undervalued, 6.9% yield, 8% potential 10 year potential annual dividend growth, 14.9% 10 year annualized total return potential
Enbridge is North America’s largest midstream company with a continent spanning network of oil, gas, and natural gas liquids or NGL pipelines. It also owns regulated utilities and renewable energy assets that give it a presence in five countries on three continents. The company’s cash flow is 96% under long-term, fixed volume guarantee and commodity insensitive contracts. Almost 100% of those contracts are with investment grade counter parties such as regulated utilities and major oil companies (like Exxon and Chevron).
Enbridge is the single best fast growing, high-yield blue chip investment opportunity right now. That’s because the US is in the midst of a major energy boom that is expected to last for decades, and will require up to $900 billion in additional midstream infrastructure. The company has fully secured the funding for its current backlog of $17.6 billion in growth projects that will allow it to grow its dividend (which has been rising at 11% annually for 23 straight years) by 10% through the end of 2020. Beyond that? The company is working on lining up contracts for up to $30 billion in additional growth projects to keep the dividend growth engine strong for the 2020’s. Best of all? With a dividend payout ratio of just 65% (management’s long-term goal is 55%) Enbridge will be retaining $5.5 billion to $6 billion per year in cash flow (after paying dividends) by the end of 2020 when its current growth plan is complete. That means that it will be able to self fund its mega growth without having to turn to equity markets (which is the norm for midstream stocks). Or to put another way Enbridge’s enormous growth potential is 100% within its control and can’t be derailed by the stock market which has been so bearish on midstream stocks over the last four years.
The midstream sector is starting to recover nicely but Enbridge is still trading at just 7 times forward cash flow. For a low risk, fasting growing blue chip (and future dividend aristocrat) such as this to be trading at 2009 style depression era valuations? Well that’s simply the fattest pitch I’ve seen since the financial crisis, and represents a once in a generation investment opportunity.
CoreSite Realty (COR): 9% undervalued, 3.7% yield, 16.3% potential 10 year annual dividend growth, 10 year annualized total return potential
CoreSite Realty is one of America’s fastest growing data center storage REITs and set to benefit from the exponential growth in data (from mobile sources) as well as cloud computing. CoreSite owns over 20 hyperscale data centers in all of America’s tech centers including: Los Angeles, Chicago, New York City, San Francisco (Silicon Valley), Denver, Boston, New York, Miami, and Northern Virginia. They serve all the biggest names in cloud computing including Amazon, Alphabet (Google), Microsoft, IBM, and Oracle. For the last five years CorSite has been growing its dividend at an incredible 35% annualized rate and analysts expect it to continue riding the data/cloud computing wave (which is at the heart of Artificial intelligence) to 16.3% annualized payout growth over the next decade. Combined with the current yield of 3.7% that means that CoreSite has the potential to crush the market with 20% annualized total returns over the next 10 years.